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Belarus Business Forecast Report Q1 2014 - New Market Report

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2014-01-05 00:07:20 - Recently published research from Business Monitor International, "Belarus Business Forecast Report Q1 2014", is now available at Fast Market Research

The Belarusian economy remains in a very precarious position despite the nascent resolution of the potash dispute that threatened to engender a balance of payments crisis. The current account deficit is set to remain substantial (we forecast 9.5% of GDP in 2014) and foreign exchange reserve levels remain woefully inadequate, covering just 1.4 months of imports in September 2013. If state-owned potash producer Belaruskali can begin to increase production substantially in 2014, it could prove the key factor in avoiding a similar crisis to that experienced in 2011/12.

The political relationship between Belarus and Russia is set to improve after deteriorating to breaking point during the potash crisis - when Minsk and Moscow engaged in a game of brinkmanship that threatened

to ruin the Belarusian economy. With no sign from the administration of President Alexander Lukashenko that there will be political reform on the horizon, we believe Russia will remain the country's key political ally in the years ahead.

Full Report Details at
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Consumer price inflation will increase from an estimated 15.0% year-on-year (y-o-y) at end-2013 to 18.0% y-o-y by end-2014 on the back of continued depreciation of the Belarusian ruble, exacerbated by a negative trade balance. This will result in refinancing rate hikes of a cumulative 150 basis points during the course of 2014, from 23.50% to 25.00%, as the central bank attempts to avert another period of hyperinflation as seen in 2011/12.

Major Forecast Changes

We forecast the contraction in Belarusian real GDP in 2014 and 2015 to be smaller than previously projected, coming in at -1.8% and -0.4% respectively, from previous forecasts of -2.5% and -1.9%. The end to the potash dispute, which will very likely engender an increase in export levels as well as a reduced decline in fixed investment, is the primary factor behind this upgrade.

Given that Belarus's trade deficit is not expected to widen to the extent previously projected, we have revised our forecast for the ruble to average BYR9,975/US$ and BYR10,550/US$ in 2014 and 2015 respectively, from previous forecasts of BYR11,250/US$ and BYR12,000/US$.

Key Risks To Outlook

With balance of payments data from the period at the height of the potash crisis yet to be released, we could see a significant deterioration in the country's current account deficit, sparking another currency devaluation and a period of hyperinflation. This would undoubtedly have a severely negative impact on our real GDP growth forecast in the long term.

A repeat of the potash crisis or a similar political risk event could result in Russia cutting off Belarusian oil supplies, not only crippling the economy but leaving Belarus diplomatically isolated for the foreseeable future.

Partial Table of Contents:

executive summary
core Views
Major Forecast changes
Key risks to outlook
chapter 1: political outlook
sWot analysis
BMi political risk ratings
Domestic politics
improving russian ties to reduce risks
- While the potash dispute that stretched Russo-Belarusian relations to breaking point in 2013 has been partially resolved, we remain cautious regarding the prospects of an all-out rapprochement. The erratic nature of policymaking by the Belarusian government could result in a further escalation in tensions, leaving Belarus politically and economically isolated.
taBle: Political overview
Long- term political outlook
Focus on russia Despite potash Dispute
- Belarus's long-term political stability is jeopardised as a result of the country's lack of institutional development beyond the executive branch. Consequently, while our core scenario is for President Alexander Lukashenko's regime to maintain its grip on power over the long term, we do not rule out the possibility of growing public dissatisfaction resulting in a sudden change of leadership or direction, particularly in light of the country's recent economic crisis. We believe the country's greatest challenge over the coming decade will stem from the regime's efforts to diversify its foreign policy agenda while maintaining strong links with Russia.
chapter 2: economic outlook
sWot analysis
BMi economic risk ratings
economic activity
end to potash crisis provides a Little relief
- The end to the potash crisis that threatened to decimate Belarusian exports will likely stave off a collapse of the economy in 2014. However, we remain cautious regarding Belarus's economic recovery, as it will take time to bring potash exports up to pre-crisis levels. In addition, a lack of structural reforms is set to continue hampering growth prospects.
taBle: econoMic activity
Balance of payments
current account still the primary risk
- The outlook for the Belarusian current account remains precarious despite the nascent resolution of the potash dispute with Russia that threatened to spark a balance of payments crisis. Goods exports are set to remain subdued, while the risk of large repatriation of earnings by foreign firms, as seen in Q113, is growing as the Belarusian economy continues to avoid key structural reforms.

Full Table of Contents is available at:

About Business Monitor International

Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at

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